CE-Oh no he didn't! Part LX: NVIDIA calls Intel's single-chip Atom pricing "pretty unfair"
By Nilay Patel 
posted May 20th 2009 3:47PM
posted May 20th 2009 3:47PM
Now that Intel's been slapped with a record $1.45b antitrust fine in Europe, it seems like the claws are coming out -- AMD just put up that "Break Free" site, and today we've got NVIDIA CEO Jen-Hsun Huang calling Chipzilla's Atom pricing "unfair." It seems that Intel sells the standard Atom chip for $45 on its own, but bundles the diminutive CPU into the oh-so-familiar netbook configuration for just $25, meaning NVIDIA's Ion chipset isn't price-competitive. Of course, this is just another twist in the endless argument about Ion, but despite the denials, this isn't the first time we've heard whispers that Intel pretty much forces manufacturers to buy complete Atom chipsets -- the dearth of Ion-powered netbooks in the market is fairly suspicious considering the GeForce 9400M at the heart of the platform is a well-known quantity. On the other hand, we've also heard this is all going to change and change dramatically at Computex next month, so we'll see -- either way, things are bound to get interesting.[Via TrustedReviews]
How can anyone compete when Intel is basically giving away their chipset and GPU for FREE while selling the Atom in bundle for $25 or $45 by itself? It's very fucking slimey what Intel is doing! They are basically saying if you buy our all 3 of our chips we will sell them cheaper than what it would cost for the processor to keep you guys from using Ion or any other GPU in the midrange.
Intel is the new Microsoft! I refuse to by anything with Intel Inside!
Intel is under no obligation to even sell the Atom chip separate. nVidia should hook up with Via and produce a good x86 CPU for less than $25, maybe with an integrated GPU like AMD/ATI's strategy.
but they already DID sell the chip separate, they decided after Nvidia announced their chip to start bundling. It's already been news for months that they're planning on changing the FSB of the next Atom so Nvidia can't sell their chipset at all (that's government interference folks). Even IF OEMs decided to throw the Intel GPU away, they would probably lose warranty support and violate their purchase contract (again the government is holding OEMs to it).
The biggest problem of all is that Intel can choose to sell the same item to different people at different prices when they control 100% of the supply. Better yet, they can choose which OEMs make a profit and which don't this way... stay in line, sign the papers or you pay double the price.
Actually, part of the European anti-trust involved showing that Intel actually does that to maintain market share. I imagine they tried to justify it as a marketing cost, but that's pretty sketchy.
This is a decent headline, but I don't think this qualifies as a CEO-NO-HE-DIDNT
This is why fans of capitalism are very often wisely not fans of capitalists, especially after they can get the government to back them up. If intel is selling stuff for "unfairly low" prices, that's GOOD for consumers. If nvidia can't sell at that price...guess what; innovate or go the hell away, don't whine to get the justice system to prop up your shitty business skills by hobbling your competitor.
incidentally, predatory pricing is virtually impossible to actually get to work...you have to hemmorage cash for longer than your competitors do, and then (and this is the hard part) raise your prices above the normal profit point for a long enough time to make back all of the money you lost. The problem is that capital is greedy and fast, and the second you start trying to sell at above normal profit, you've got someone starting back up nvidias old plants and cranking out chips to compete with you. Predatory pricing is a sasquatch; often talked about, very very rarely seen.
I used to be a big fan of anti-trust suits, and very worried about predatory pricing. Then I started studying economics, and now believe differently. Now, I think you only *really* need to worry about monopolies when the government grants them, so rather than looking to them for help, I now see them as the main culprit.
Thank you OnlyShawn. You seem to be the only person on this site with half a brain in his head.
Without government protectionism, a coercive monopoly ie. predatory pricing has never existed, and I don't see how it ever could. Study economics people!!!
OnlyShawn said it best, that predatory pricing is sasquatch, it just can never and will never work.
This doesn't sound like predatory pricing, more like product tying to me.
http://en.wikipedia.org/wiki/Product_tying
What you say is true for commodity markets. But it's not true for cutting edge industries like the graphics chip market where there are high barriers to entry.
If Intel eliminates its competitors by abusing its market position, the high barriers to entry into the markets it serves will ensure that Intel has a monopoly for quite some time.
From what I read Intel is selling the CPU for $25 if you buy the combo so its 25+chip set= whatever. If that is the case they could be selling the CPU for a loss but making up the difference in the cost of the chip set, which is fine. We see this all the time on tech stores selling stuff in combos to get people t buy.
Although I don't like a lot of things Intel dose this ins't one of them it's called marketing to get people to buy stuff. Goto frys, Best Buy or any decant e-store and you will see this practice in use.
Nvidia is just not robust enough atm to compete in this market. they need to hookup with AMD or VIA to get something cheaper. Intel isn't the only dog in the yard.
Engadget please update your forums I want to correct my spelling!!!!
Your spelling isn't what needs correcting. Intel is NOT selling the Atom for $25, they're selling the Atom and the 945GM for $25. Buying an Atom alone costs MORE, $45, effectively shutting nVIDIA out of the market.
demand: still sloping downwards. what's the problem here?
OnlyShawn There is no problem. God does no one understand economics???
The issue here is that Intel isn't really giving manufacturers a discount for going with the Atom bundle, they are taxing the purchase of just the CPU. Doing so makes it extremely difficult for nVidia to compete and sucks for us, the consumer. Rather than having a chance to get a netbook capable of 1080p playback and light gaming, we're stuck with one that has near-worthless video performance. Given the trend of offloading tasks to the GPU, this is a real issue.
No mate, he got it right...
They are selling the *Atom* in the bundle for $25 - that means the Atom part of the bundle is $25, not the price for the whole bundle. The chipset would be in the region of $25 so the bundle would be about $50. If it were the case that the bundle were $25, everybody would buy the bundle and throw away the Intel chipset.
$45 for the CPU is actually a reasonable figure, compared to its competition.
That means that, effectively, Intel are selling the chipset for $5 ($50 for bundle minus $45 for CPU), aka way below cost.
Why do that? Just to keep nVidia out of the market. It's the $5 that nVidia have to compete with, and there's no way that they can do that.
It's nothing new... they have done exactly the same thing to nVidia, SiS, ATi and VIA in the desktop and notebook chipset market and I have no idea how they've got away with it for so long.
The reason they are doing it is because it is in their interest to keep Atom crippled - if it competes with the Pentium / Centrino lines then it will cannibalise their own sales and they'll lose a hell of a lot of money.
I stand corrected I went and read the original article engadget mad it sound weird. Yes I agree Intel needs to stop this practice they make good stuff.
The old saying still holds true when you have all the power the thing you fear the most is loosing it.
Dear Nvidia,
How about you stop talking shit and start making GPU's that don't make the lights in every house on the block flicker when I start playing a game. Your shit GPU's are the epitome of lets just shove more at it vs. making it more efficient like Intel has been doing over the past 3 years.
In conclusion; get bent.
You're an idiot. Normally I justify a response like this, but it isn't necessary. And before you call me an nVidia fanboy, I own an HD 4870 and my next card will be an HD 4890.
So? I don't get it?! Instead of forcing Intel to RAISE their prices so that they're being "fair", they all should try to catch intel and actually all LOWER the prices, no?! That'd be good for the consumers the stupid EU "tries" to protect by fineing companies and using the cash for its own good... This way consumers are those who will loose with everyone being so "fair" keeping the prices up!
I hate this buerocratic bullshit from EU and I live in it! :(
lrn2economics
Read up on anticompetitive behavior, antitrust acts, monopolies, and predatory pricing. The problem is that neither Intel or Nvidia are making a profit on these chips. However, Intel knows that they can lose money for far longer than Nvidia can, so either Nvidia's customers all go to Intel for the low low prices, or Nvidia goes out of business making chips that lose them money on each one they sell. Either way, Intel wins and eventually if they keep it up they've put all the competition out of business. From there, they can jack up the prices all they want (or quit making new technology) because where else are you going to go?
Geez engadget, you guys really need to explain this stuff. I weep for the future if this is the level of understanding people have about economics, especially in something as important as tech companies.
Thanks for your enlightenment, Barry, but in my case, it's not my level of understanding the economics, it's my level of having a different opinion over this issue...
@barry
It is you who doesn't understand economics. See post below...
This is classic anticompetitive behavior. Intel has the cash reserves, so they can afford to dump the proc+chipset far below cost and lock Nvidia out of the market (since Nvidia doesn't have mountains of cash to burn through in order to keep up). It's illegal, and this type of behavior is why Intel got massive fines in Europe. It absolutely harms the market and the consumer, and they should be fined to hell and back for it.
It's hilarious/sad to see idiots cheering for Intel. "Hooray, thanks for screwing us, you're awesome!"
sorry, who's being screwed? the customers who get cheaper lappies?
@OnlyShawn: In the short term, yes, it's great that you get your cheaper lappies. The damage you don't see is that other companies which might offer better technology or better prices in the future get run out of business or they never even enter the market. So that cool ultrathin, ubercheap lappy with smoking graphics in 2011 never gets made and instead you're stuck with janky intel graphics forever.
@OnlyShawn: You'll only be getting cheaper lappies if you buy Intel's bundled platform which sucks. If you buy Nvidia's chipset you're going to have to pay more than it should really cost.
@Barry
Anti-competitive my ass!! If someone wins the competition by obtaining an optimum price/performance ratio they're being anti-competitive?
Do you have a right to cut down your competitor if they're winning? If so, you were never competing in the first place. The game for which you were competing has been fixed from the start.
Don't you see the contradiction in what you're saying? You are saying that if Intel gains market share on Nvidia, then Intel no longer has incentive to innovate. What incentive does Nvidia have to innovate when they can instead of spending all that money innovating, use the government to keep them competitive?
You people that use the term anti-competitive need a reality check.
Let's briefly examine the anti-trust laws in the EU and the US (their similarities).
Situation A:
Your prices are higher than your competitors...(regardless whether you product is superior to your competitors)
Law:
You can be charged with "Price Gouging" or "Abuse of market position".
Situation B:
Your prices are similar or the same as your competitors...(regardless whether you product is superior to your competitors or vice versa)
Law:
You can be charged with "Attempt to fix prices" or "Collusion"
Situation C:
Your prices are lower than your competitors...(regardless whether you product is superior to your competitors or vice versa)
Law:
As we've seen you can be charged with "Attempt to monopolize" or "Unfair Competition" or "Predatory Pricing".
Are these the laws that you are glad are being enforced?
Barry, if you want better chips than the current "janky" Intel chips, you have three options.
1) Go work for Nvidia and help them cut costs on their chips or help them make an CPU
2) Start your own company to do the same
3) STFU !!!
You seem to want to use a fourth option. That is to put a gun to the heads of Intel employees and stockholders and force them to raise their prices.
You might want to rethink who you think is evil...
Right, I understand your fear. I also know that there is a giant knowledge problem here, as the gov/judiciary does not have the information to "correctly" set prices. See my above post on the Sasquatch of "predatory pricing".
There's nothing that intel is doing to forcibly keep amd or anyone else out of the market (if I'm wrong I'll gladly recant, and that IS a valid role for gov intervention), because "low prices" is not a forcible exclusion.
I realize that people and even economists can disagree about this, but I *believe* that economists specializing in this field tend to hold opinions similar to mine, and dissimilar from the popular perception (and my old opinion).
Realize how much incentive a lesser competitor would have to complain of "unfair competition", and I think you'll be less prone to believe their cries.
Also, years ago, there were two companies that people thought were "so big" that nobody could ever compete with them, and government power was required to "open up the market to competition": A&P grocery stores and IBM, particularly, I believe, in their server areas. Al might as well be dead now, if it isn't, (with absolutely no gov intervention, but simply innovation on the part of competitors), and by the time IBM's antitrrust case was completed, they were a shadow of their former selves.
Your fears make sense, and are common, but history bears a different witness, and is worth considering.
Incidentally, and I don't believe that this "settles" the argument, but I'm currently getting my masters degree in economics.
@bot
More than it "should" cost??
Who are you to tell an industry you have nothing to do with, what their products should cost?
If Nvidia is better and people are willing to pay more for the Nvidia they will. If not, they won't. Deal with it without putting guns to people heads and forcing them to raise prices...
@iLoveGrimby: there are so many fallacies in your logic I don't know where to start. You fail to mention that the hypothetical company in question (we're of course talking about Intel here) is a monopoly or near-monopoly in the semiconductor market. I'll leave it as an exercise for the reader to google 'intel monopoly abuse' and find out more.
In situation A, if you're a monopoly, of course you're abusing your position if you charge more than a fair price. There are no competitors for your customer to go to, because you already ran them out of business. This is why we have antitrust laws, so one company can't dominate the market and milk us all dry.
In situation B, if you coordinate with your 'competitors' to keep prices the same, you are by definition engaging in price-fixing and/or collusion.
In situation C, if you're a near-monopoly and you dump goods onto the market to bankrupt your competitors then yes you're engaging in predatory pricing by definition.
You either understand what's going on but don't like to hear the what I'm saying, or you don't have an understanding of Intel's market power.
@Barry
First, I'm glad you answered the way you did to the various situations. Do you see now that no matter what Intel does with their pricing strategy, higher, lower, or same, they are guilty of breaking antitrust laws? What is a company to do if they are breaking the law no matter where they set their prices?
Second, what makes you think something such as a "fair price" can be defined, besides some politician's arbitrary guess? Who's to say what is a fair price and what is unfair? Someone has an inflated sense of entitlement. People like you always use undefinable terms to confuse the issue or mislead.
Third, I really don't have the time or energy to explain fundamental economics to you. If Intel is indeed a monopoly, they became one with the help of the same government that you are now asking for help. They became so through protectionism disguised as regulation, or just regulation in general. If you want to know exactly how the U.S. government regulates business, read their publication which lists all their regulations on business. It's called the federal register and it's 80,000+ pages (double columned).
The situation you describe with a company like Intel selling products at a loss in order to keep competition out has never been successfully implemented in history. The reason why is that the competition is relentless (because people always jump at opportunities to make fortunes) and as soon as Intel raises their prices back up in order to recoup their losses the current competition or a new company will undercut Intel and force them to do it all over again, resulting in even greater losses...and rinse and repeat. Eventually, Intel or whatever company will either completely go out of business, or they will learn their lesson and realize that their strategy is flawed and lower/raise prices back to market level. They will never do it again, as they will have lost billions in the process.
The only reason the above result will not happen is if Intel is being protected in the marketplace by a governing body. This governing body could restrict new competition to Intel by delaying or denying a business license to the new start-up competitor, or through zoning restrictions, or selected enforcement of regulations, or a seemingly endless supply of other tactics.
You seem content to shove a gun in Intel employee's faces and tell them, "You have a sworn duty to charge more for your products, so that I can buy products from your competitors. If you don't take more money for your products, I'll fine you."
Finally, you missed the primary point of my previous post. I'll paraphrase it in here so you won't miss it this time...
Don't you see the contradiction in what you're saying? You are saying that if Intel gains market share on Nvidia, then Intel no longer has incentive to innovate. What incentive does Nvidia now have to innovate when they can instead use the government to keep them competitive?
Well...
Ask what stops people from buying the $25 Atom/Chipset and throwing away the chipset for ion... that's right folks "the government"!
If the market was truly free, then OEMs could say whatever they wanted to get the chips and intel's control over their use would end when the check cleared. The government enforces all sorts of contract for intel, patent, copyright, trade secret (pricing), and intel uses those things to squeeze OEMs to sign away their "purchaser" rights, just like companies use EULAs to control how we use software. When intel (or microsoft) makes egregious demands in their contracts, the government should tell the courts to simply ignore the offending provisions and have intel pay the court and defendants for wasting everybody's time. But the lawyers won't let that happen, or not cheaply.... The fact that intel's been going on about this for almost a year and the DOJ/FTC isn't stepping up to address the problem as the terms laid out right now are a clear violation is the big problem with the system. Just like Microsoft got a big fine and "double secret probation" for some years really isn't fixing the problem ... in fact the companies profited quite nicely from it.
Ask a real manufacturer what it's like out there.. how about somebody that supplies GM? A medium sized, no-name business that makes one part for GM will get a visit from the FTC if they tried to squeeze GM like this. Hell, the government is letting automakers filch out of supplier contracts right and left, yet won't hold the same terms to OEMs to get out from Intel or Microsoft's thumb.
Of course the biggest problem is that the government won't use it's position as a CUSTOMER to fix these problems. Look at what computers they buy... WinTels... and on "no-bid" terms.. they take bids from OEMs ... for Windows + Intel and simply forget to look at other options. Imagine the government giving half of its sales to AMD solutions and half to VIA/nVidia solutions. Then they'd have three strong players and plenty of training and support. Heck imagine giving 1/4 OS installs to Windows, Apple, Red Hat, & Ubuntu and demanding submitted apps run on all the systems. "Second source" is the whole reason we even HAVE and AMD in the first place!! Imagine the GAO recommending to buy Hondas or Camerys (more parts than GM made in the USA now) after bailing out the automakers (bad credit terms for long term support now) .... but that's what they do to Linux/Apple/AMD on a daily basis and nobody blinks.
Well if they think that is unfair, I think the several thousand defective Nvidia GPU's are unfair to the customers that purchased them.
On a personal note I think the Intel 4500M chip thingy is a complete load of bull. The HD and SD versions both....well suck. I am sick of the laptop makes using this think to "cut cost" in a price range that would dictate the customer will want better performance. Top it off with a little Nvidia GPU failure = ATI HD3200/780G and HD3300/780GX FTW!
It's funny how many people were bashing amd after the anti trust case. If you built systems during the time AMD is complaining then you know exactly what the situation was. It's very similar to what nvidia is complaining about. The Athlon processor was MUCH better than the PIII and the PIV w/sdram. Just because Intel cpu tech is a little better than amd's doesn't mean that it was the case 10 years ago.
Intel's policies are atrocious and, at the least, anti competitive. Happy to see the EU can't be bought off as easily as American politicians.
Ok pay attention Jen-Hsun Huang, this ought to be easy enough for even you to understand. You threw the first punch. Remember the whole deal about SLI would not be allowed on Intel chipsets? Remember how folks called that unfair. And now we hear you whining. Whine away, tough guy. Hope you actually have someone in your company paid enough to listen to you. Because Intel told you it was going to make you eat that decision.
So grab a fork and some salt and pepper. Because it sure is going to be fun to watch you eat that hat.
Intel didn't pay nVidia for a license for SLI... OEMs just started using it without paying royalty to nVidia, then intel started marketing it. That's every bit as valid as what Intel is trying to claim by changing the chipset so Nvidia has to get a new patent license for the bus. SLI only exists on Intel because nVidia shrewdly purchased rights to make Intel chipsets from defunct engineering shops. Intel tried to cut nVidia out of selling the chipsets with technology nVidia invented...after nvidia spend the time to bring it to Intel CPUs. THAT was the first shot!
I find it pretty hard to feel sorry for a company with nVidia's record of dodgy sales tactics to be honest.
I'd like to see some beating on Intel....mostly because they have made things kind of unfair. But only enough beating to get the point across, not so much that they cripple the company and break it's legs. Not that anyone could except for Intel themselves...cough bad management cough greed cough cough
If Intel's slimy operation means cheaper prices for consumers, remind me again why I should care...?